Today the British government announced its rescue plan to recapitalise British banks by offering to take preference shares in them and offering capital and taking senior debt against a wider range of collateral assets. Robert Peston, the BBC's business editor, has described this as "nationalisation by stealth". This has a nice ring to it but it is misleading.

The term "nationalisation by stealth" implies that the government actively wants to take the banks into partial state ownership and has been planning to do this for some time. The reality is quite different. Nationalisation occurs when a government takes a company into public ownership – and the rescue's of Fannie Mae, Freddie Mac and the American Insurance Group were all reluctant nationalisations as the US government took a 79.9% share in the companies in return for injecting rescue finance.

What we see today is not nationalisation but a large-scale financial rescue plan that has been forced upon the government by the course of events. The British government was initially unwilling to take on Northern Rock and tried to find a way of getting the banking sector to take it over. The Bradford and Bingley rescue was forced upon the government because it became increasingly clear that the bank could not finance its mortgage debts.

What the government is doing is taking a stake in the major banks in return for a large scale cash injection. In many ways, it is similar to what Warren Buffet did by putting $5bn into Goldman Sachs and $3bn into General Electric in return for preference shares which give him first call on the companies' assets if they get into difficulties, and a return on his investment.

Taking an equity stake in banks in return for a capital injection is hardly nationalisation. On the contrary, it reflects a reluctant decision to do what is necessary in order to stop the financial sector going bust. But no sensible government is simply going to hand over large sums of public money for nothing. It is going to demand a stake, as the US Treasury did with its bailouts and my guess is that as and when the markets recover the government will sell down its stake, not least to reduce the cost to the Treasury.

The last thing the British or American governments want is to become the permanent owners of large swathes of the financial sector. Paulson is a strong proponent of free markets and his bailouts were essentially forced by circumstances. What we have seen today is not nationalisation by stealth but a forced rescue by the British government in the face of an international credit crunch.

I have little doubt that if the Bank of England could have arranged a "lifeboat" scheme similar to the one it orchestrated of the secondary banking sector in 1974 with the aid of the clearing banks it would have done so. This time, it is the clearing banks that are in trouble, and a lifeboat scheme is impossible. The scale of the cash injection and support required this time has necessitated much more large-scale action. But it is recapitalisation and support, not nationalisation by stealth.